More than half of recent college graduates in the United States are working in positions that do not require a university degree within one year of completing their studies, according to new research from the Federal Reserve Bank of St. Louis. The findings reveal a deepening crisis in the American higher education system, where traditional promises of economic mobility through degree attainment are failing to materialise for millions of young Americans.The unemployment rate for recent college graduates aged 22-27 has climbed to nearly 6 per cent, significantly above the national average of 4.2 per cent, as reported by Oxford Economics. Despite comprising only 5 per cent of the labour force, recent college graduates account for 12 per cent of the rise in national unemployment since mid-2023, highlighting the disproportionate impact of current economic conditions on the newly educated workforce.Persistent underemployment afflicts nearly half of graduatesAnalysis from the Federal Reserve Bank of New York reveals that the underemployment rate for graduates—defined as working in jobs where 50 per cent or more employees do not require a degree—stands at just over 41 per cent. The New York Fed’s data shows that unemployment amongst recent college graduates averaged 5.3 per cent in the second quarter of 2025.The Federal Reserve Bank of St. Louis research indicates that underemployed graduates earn only about 25 per cent more than typical secondary school graduates, compared to 88 per cent more for adequately employed graduates. Perhaps more concerning, the data shows that 45 per cent of college graduates remain underemployed even 10 years after graduation, suggesting that underemployment is not merely a temporary post-graduation phenomenon.Major disparities emerge across academic disciplinesThe employment outcomes vary dramatically depending on field of study, with certain majors experiencing particularly severe underemployment rates whilst others maintain strong job placement records.College majors with the highest underemployment rates
Source: “The Labour Market for Recent College Graduates,” Federal Reserve Bank of New YorkIn stark contrast, graduates from certain fields continue to find employment that utilises their educational training at much higher rates.College majors with the lowest underemployment rates
Source: “The Labour Market for Recent College Graduates,” Federal Reserve Bank of New YorkGender divide emerges in graduate unemployment patternsA Financial Times analysis of US Current Population Survey data reveals significant gender disparities in employment outcomes for recent graduates. Whilst unemployment rates amongst Gen Z men with college degrees roughly match those of non-college graduates at approximately 5.5-6 per cent, women with degrees experience lower unemployment rates of around 4 per cent.The divergence is partly attributed to higher demand in healthcare sectors, which women are more likely to pursue. The US Bureau of Labour Statistics projects that healthcare occupations will grow much faster than the rate for all occupations over the next decade, translating to approximately 1.9 million openings each year.“Health care is a classic recession-resistant industry because medical care is always in demand,” Priya Rathod, career expert at Indeed, told Fortune magazine, explaining the sector’s relative stability.Technology sector struggles compound graduate employment woesThe computer science field, despite showing relatively low underemployment rates, faces particular challenges from technological disruption and market oversupply. CBS News, citing Oxford Economics research, reported that recent graduates with computer science degrees suffer from job market oversupply and automation impacts.According to Oxford Economics, artificial intelligence has begun replacing lower-level jobs in technology sectors, especially affecting recent graduates without significant experience. The report identifies unemployment amongst recent graduates as being driven largely by a mismatch in tech sector hiring and AI replacing lower-level computer science positions.Labour market fundamentals shift away from degree requirementsThe traditional premium associated with university education appears to be diminishing across multiple sectors. Fortune magazine reported that unemployment amongst Gen Z men with college degrees is roughly equivalent to non-college graduates, marking a significant departure from historical employment patterns.The analysis noted that around 2010, non-college-educated men experienced unemployment rates exceeding 15 per cent, whilst the rate amongst college graduates remained closer to 7 per cent. This historical gap has now largely disappeared for younger workers.Employers are increasingly dropping degree requirements for entry-level roles, whilst young men are shifting away from college into skilled trades. Vocational school enrolments have risen approximately 20 per cent since 2020, according to the Fortune analysis.Economic uncertainty perpetuates graduate job search difficultiesDespite uncertain employment prospects, labour force participation amongst recent graduates remains steady, as reported by Oxford Economics. The research indicates that underemployment rates for graduates remain steady as well, suggesting a reluctance amongst job seekers to shift their search parameters.Oxford Economics identifies structural shifts in tech hiring and artificial intelligence impact as key reasons for higher graduate unemployment rates. Economic uncertainty and reduced tech hiring also contribute to prolonged unemployment periods for recent graduates.The Federal Reserve Bank of St. Louis noted that unemployed recent graduates continue active job searches despite market conditions, often leading to underemployment rather than extended unemployment periods. The persistence of these patterns suggests fundamental changes in how employers value educational credentials relative to practical skills and experience.